Information frictions and housing market dynamics

Elliot Anenberg
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Elliot Anenberg: https://www.federalreserve.gov/econres/elliot-anenberg.htm

No 2012-48, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper examines the effects of seller uncertainty over their home value on the housing market. Using evidence from a new dataset on home listings and transactions, I first show that sellers do not have full information about current period demand conditions for their homes. I incorporate this type of uncertainty into a dynamic search model of the home selling problem with Bayesian learning. Simulations of the estimated model show that information frictions help explain short-run persistence in price appreciation rates and a positive (negative) correlation between price changes and sales volume (time on market).

Date: 2012
New Economics Papers: this item is included in nep-dge and nep-ure
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